Economic fragility, energy on the line for EU countries considering tougher Russia penalties

GWEN IFILL: So what is the chance Europe will form a united front when it comes to sanctions against Russian?

For that, we turn to Heather Conley. She’s director of the Europe Program at the Center for Strategic International Studies. She also served as deputy assistant secretary of state for European affairs during the George W. Bush administration.

GWEN IFILL: So, what is the significance of what the E.U. did do today and what they didn’t do?

HEATHER CONLEY: Well, they are accelerating the preparation of more enhanced lists.

So what we assume they will produce on Thursday is an expanded list on top of the 63 three individuals and entities that the E.U. has already sanctioned in relationship to supporting the annexation of Crimea. We expect that they will expand that list, perhaps getting a little closer to Putin’s inner circle, and targeting, sanctioning names specifically for those that have supported the pro-Russian-backed separatists.

And then, concurrently, they’re preparing a list that will look at sectoral sanctions, so, on energy, the financial sector, defense issues, dual-use technologies. We have heard Europe talk about this third phase or tier three sanctions since March, but we have never seen a list developed. So I think this will be a preview and a message to President Putin that, should the Europeans decide to take action, they have got quite a bit of very targeted areas which would certainly hurt the Russian economy.

GWEN IFILL: But you do mention that it’s been since March, and it seems as if baby steps have been taken, threats have been made, not necessarily on any follow-through. What is different this time?

HEATHER CONLEY: Well, clearly, the downing of MH17 and this unbelievable tragedy and the outrage of how the deceased have been treated in Eastern Ukraine has completely changed the political tenor in Europe.

You have British Prime Minister David Cameron. You heard the British foreign secretary, Philip Hammond. They are at a new place politically and they are willing to sacrifice some economic pain for more sanctions. The problem is, all of Europe isn’t in that same place.

GWEN IFILL: Well, that was my next question to you. What explains the reluctance up until now, and the reluctance still on the part of some European nations?

HEATHER CONLEY: As President Bill Clinton would say, it is the economy, stupid.

It is about the fragile nature of the European economy. Unemployment in the Eurozone is 11 percent. The French economy and Italian economy extremely vulnerable, may even fall into recession. And this means jobs. This means a real economic impact for those who are very dependent on, you know, strong European-Russian economic ties. It is also about energy.

And we can’t take our eye off an upcoming winter, that, should Russia decide to cut off oil and gas through Ukraine, Europe would be devastated. They’re very dependent.

GWEN IFILL: Let’s talk about two countries, Germany — one-third of their energy comes from Russia — and France, where we saw today they’re going ahead with shipping or selling helicopter warships to Russia, in spite of this.

Why couldn’t Francois Hollande says, to make a point, we won’t give you these? And, obviously, he was pressured to do that.

HEATHER CONLEY: Yes, absolutely.

This French military sale of these assault ships is a poster child for why Europe seemingly cannot take more decisive steps in light of the escalating crisis in the Eastern Ukraine. It means 2,500 jobs in France. It’s 1.2 billion euros of sale. And even today, they were reluctant: No, we will sell that first ship, but maybe we will postpone the second ship.

Ironically, the second is named the Sevastopol, which of course is the capital of Crimea, again, high symbolism. The French are starting to move a little bit, but, again, not commiserate with both the tragedy and the escalating crisis in Ukraine.

Germany is slightly different. I think they have acknowledged that they’re going to have to go forward in some additional sanctions. The German foreign minister, Frank-Walter Steinmeier, said today, we tried our best. We are pursuing dialogue, but we have to take some more steps to encourage Russia to take more meaningful steps.

GWEN IFILL: The president — we just heard Ben Rhodes say the president has been working the phones. His chief of staff, his national security adviser is — are in Germany meeting with Angela Merkel’s people.

And we hear tough talk coming from the Britons. So, is any of that having any persuadable — any persuadable effect? Does the U.S. have the leverage to make this happen?

HEATHER CONLEY: I think the White House would have liked last week, when we announced enhanced sanctions against Russia, to have the Europeans right there with us and we did it together.

And it — we didn’t.

GWEN IFILL: It didn’t happen.

HEATHER CONLEY: We didn’t wait for them.

But what our additional leadership in the sanctions area, it sends a message to Europe that we will not wait for them. Our sanctions do have a dampening effect on Europe, because, as we target Russian financial entities, Russian energy entities, European companies will have a more difficult challenge in working with them if they deal in the U.S. dollar, if they deal with American institutions.

There is a knock-on effect. But despite enormous amounts of pressure — and the reason that Denis McDonough, the White House chief of staff, is in Berlin today is because the U.S.-Russia — the U.S.-German relationship…

GWEN IFILL: Not so great right now.

HEATHER CONLEY: Not so great. The NSA scandal and the recent revelation of our intelligence work in Germany has really damaged that relationship.

So this is an uphill climb. But the Europeans themselves have to take responsibility for their security environment and their neighborhood. And we hope they get there by themselves.

GWEN IFILL: Does it matter what kind of sanction we’re talking about, whether it’s an arms embargo, whether it’s financial action, or is there any appetite to target Vladimir Putin personally?

HEATHER CONLEY: Well, in some ways, you sort of feel it’s an all of the above.

I think, like the U.S. sanctions, we have targeted that inner circle around President Putin that is really shaping their support for the pro-Russian-backed separatists in Eastern Ukraine. But to really get the attention of the Russian leadership and to really impact the Russian economy and to hope to change behavior — that’s what we’re trying to do — we’re hoping to change Russian behavior — you have to focus on those sectors where they rely on Western financial support and Western know-how and technology.

That’s energy. That’s certainly in the financial sector. Europe has enormous power to change President Putin’s calculations about the costs of his support for these Russian-backed separatists. Whether they do that or not is an entirely different question.

GWEN IFILL: That’s exactly what we’re watching to see.

Heather Conley of the Center for Strategic and International Studies, thank you very much.